Goldman Sachs dropped from auction of £109bn Lloyds portfolio

Lloyds Banking Group has dropped Goldman Sachs from the auction of an £109bn investment contract, leaving BlackRock and Schroders in a two-horse race to secure one of Europe’s largest investment mandates.

A person close to the auction — codenamed “Project Swift” by Lloyds — said the UK launch of Goldman’s retail bank, Marcus, had raised competition concerns for Lloyds, the third-biggest UK bank by assets.

Goldman last month began accepting UK deposits for Marcus, in the latest expansion of its consumer banking operation, making the US group a direct competitor with Lloyds.

Standard Life Aberdeen has managed the £109bn contract since 2014 but Lloyds pulled the business in February, also on competition concerns. SLA and Lloyds-owned Scottish Widows are rival insurers. Aberdeen, which was bought by Standard Life last year, had managed the £109bn pension portfolio on behalf of Scottish Widows.

Goldman and Lloyds declined to comment on the auction. However, Lloyds has said there was “enormous” interest in the contract and it hopes to decide the winner or winners by the end of the summer. It could select a sole winner or split the mandate.

The person close to the bidding process cautioned that the auction still had more time to run and no final decision had been made.

BlackRock, Schroders and JPMorgan Asset Management were selected to take part in a second round of bids in April with Goldman Sachs Asset Management also joining the fresh round of bidding. JPMorgan has since dropped out of the running, according to another person close to the process. SLA did not make it through to the second round.

SLA has been fighting to retain the contract, which was due to run until 2022. SLA believes its single biggest client has “no right” to remove the mandate and the two companies are at present locked in an arbitration process.

Martin Gilbert, co-chief executive at SLA, last month said he had not given up hope. “We are planning for the worst and hoping for the best,” he said.

However, the UK bank regards SLA as a “clear and material competitor of Scottish Widows and Lloyds Banking Group in the UK and to suggest otherwise is not credible”.

Days after Lloyds said it planned to pull the contract, SLA announced it was closing the door on almost 200 years of history with the sale of its insurance business to Phoenix Group.

The £3.28bn insurance deal was completed last week, netting SLA a cash consideration of £2.28bn and a near 20 per cent stake in the enlarged Phoenix Group.